The renewables industry is currently being plagued by a supply-chain crisis, which is being fuelled to a large extent by geopolitics.
To gain an understanding of the dynamics at play here, it’s worth noting that almost all of today’s global manufacturing capacity for solar PV is in the Asia-Pacific region, mainly China.
This over-reliance on China in particular blew up in the face of the solar industry when the covid-19 pandemic hit. Lockdowns in China meant that the manufacture of, for example, polysilicon – a key component in solar panels – was severely disrupted, resulting in many solar projects in the US and other countries being put on hold.
Investigation devastates solar industry
However, the global solar industry’s dependence on component manufacturing in Asia has also caused another set of problems, specifically for the US solar industry. The US Department of Commerce has been forced to launch an investigation into imports of solar panels assembled in Southeast Asia. The investigation began following allegations that panels assembled in Cambodia, Malaysia, Thailand and Vietnam were circumventing duties aimed at limiting imports of solar cells and panels from China.
The effect of the investigation was devastating for solar developers. It meant that purchasers of components from companies in the affected countries saw shipments suddenly being delayed, with some suppliers even going as far as halting shipments altogether.
“As the International Energy Agency has highlighted, supply chain concentration is a ‘primary risk’
for clean energy technologies”
The scale of the disruption piled the pressure on US president Joe Biden, who as a result, took the decision to declare a 24-month tariff exemption for solar panel products from Cambodia, Malaysia, Thailand and Vietnam in a bid to retain a diverse supply chain. Yet despite Biden’s best efforts, solar supply chains are in a dire situation. The Ultra Low-Carbon Solar Alliance was forthright in its assessment of the situation, saying “global supply chains are a mess”.
Russian invasion further undermines supply chain
If all this was not bad enough, Russia’s invasion of Ukraine dealt a further blow to the renewable energy supply chain. One impact of the ongoing war has meant that global energy supply chains have been placed under enormous pressure, with one of the effects being a shortage of semiconductors and other critical minerals needed to manufacture clean energy technologies, including solar panels.
So, how exactly do these supply chain disruptions impact the solar industry? The problems caused can be grouped into three categories:
- A shortage of essential commodities
The soaring demand for certain commodities has resulted in a dramatic increase in raw material prices due to the lack of supply, largely attributed to the ongoing effects of the pandemic. In particular, the shortage of polysilicon – a vital component in the photovoltaic supply chain – has meant solar prices have rocketed due to the spike in demand for solar cells. Meanwhile, other components used for the manufacture of PV cells – namely silver, copper, aluminium and glass – have also been subject to price inflation as demand outstrips supply.
- Bottlenecks in the supply chain
Commodity shortages have been exacerbated by global supply-chain constraints caused by higher shipping costs, factory closures, trade actions and import tariffs. Supply-chain constraints such as these have had a devastating effect on scheduled solar projects around the world. The consultancy Rystad Energy has estimated that increasing shipping and equipment costs could result in 56 percent of utility-scale solar projects worldwide planned for 2022 being postponed or cancelled.
- Labour shortages
The solar industry is being severely impacted by a skilled labour shortage caused by the covid-19 pandemic. US trucking companies suffered a record deficit of 80,000 drivers in 2021. In addition, solar industry construction contractors are also struggling to source enough skilled labour to work on solar projects.
Why we should diversify supply chains…
What’s the solution to these problems? Now is the time for governments and industry to take action to diversify supply chains.
As the International Energy Agency has highlighted, supply chain concentration is a “primary risk” for clean energy technologies. Indeed, the fact is that concentration at any point along the supply chain makes the entire supply chain vulnerable to incidents, whether they be new policies introduced by individual nations, natural disasters, technical failures or decisions made by individual companies.
In response, the IEA has suggested that “voluntary strategic stockpiling”, where applicable, could help countries weather short-term supply disruptions.
…and prioritise protection of existing renewables
However, in addition to diversifying supply chains, it is also important that we do all we can to protect existing renewable energy assets.
In the case of the solar industry, the lack of availability of solar components, in addition to the increasing cost of shipping them due to supply chain blockages, means any damage sustained by a solar farm has the potential to have a major impact on its financial viability.
As a result, solar farm operators need to ensure they do everything possible to protect their existing assets in order to avoid facing the challenge of having to source replacement components if a solar system is damaged. A major part of this strategy consists of taking steps to protect solar assets against fire risk.
Research has demonstrated that the risk of fires at solar farms is potentially being underestimated due to under-reporting and a lack of available data. According to one study by the UK’s BRE National Solar Centre, researchers “strongly suspect a degree of under-reporting, especially among solar farms and domestic thermal events that were resolved by a solar installer/maintenance engineer”.
Reducing the risk of solar fires
A study carried out by the European testing and certification company TÜV Rheinland, which has been cited by the US Department of Energy’s Solar Energy Technologies Office, included a number of recommendations for minimising the risk of solar fires, including: ensuring solar systems are regularly tested by independent third parties; incorporating additional safety components; creating standardised quality assurance measures and ensuring defective or prematurely aged components are quickly replaced.
In addition to the TÜV Rheinland recommendations, solar farm operators are also advised to address the issue of fire risk by conducting fire risk assessments and incorporating fire suppression systems.
In conclusion, supply-chain problems threaten to derail nations’ efforts to speed up the global energy transition. Consequently, supply-chain diversification should be near the top of the solar industry’s agenda and voluntary strategic stockpiling should be given careful consideration.
However, supply-chain diversification can take time, and a more immediate solution to the problem involves taking all steps necessary to protect clean technology assets from all kinds of potential damage, including fire. The better protected our clean energy assets are, the less likely the industry will need to rely on an increasingly unpredictable global supply chain to replace components.
Ross Paznokas is global business development manager, clean energy for Firetrace International, a provider of fire suppression systems, based in Scottsdale, Arizona.